Zero-rated internet services: What is to be done? Ariel Futter and Alison Gillwald POLICY PAPER 1, 2015: BROADBAND 4 AFRICA September 2015 The authors would like to thank Enrico Calandro, Chenai Chair, Steve Esselaar and Safia Khan from Research ICT Africa for their participation in the conceptualisation of this paper and for the extensive comments and references they provided. 1 Facebook recently celebrated the one-year anniversary of its non-for-profit initiative, Internet.org.1 Facebook claims to have set up this initiative to help those in developing countries who cannot afford to pay for a fixed-line or mobile data Internet connection get online. The application provides users with access to what they term “basic internet services,” including Facebook, Facebook Messenger, and a suite of country specific websites related to education, finance, health, information, the marketplace, the news, and women’s issues. Though critics have argued that this does not constitute access to the ‘free and open’ internet it is a far more comprehensive offering than Facebook Zero, their stripped down application developed originally for feature phones and the application that introduced many mobile users to the internet. This provided access to the Facebook Zero app only, which did not have any video, image and audio features. By mid-2015 Facebook had partnered with more than twelve mobile operators in seventeen countries to provide free usage of its Internet.org mobile application. Facebook used the anniversary to highlight the initiative’s success. It reported that nine million people have begun using the Internet as a result of its efforts.2 Although this has been welcomed by some as a strategy to bring Internet users online for the first time, the introduction of internet.org has unleashed a vociferous debate about the long-term impact of Internet.org, and similar offers for free Internet access. Why is there so much debate surrounding Internet.org, a non-profit initiative ostensibly meant to help the world’s poor? Internet.org is just one manifestation of an increasingly popular and controversial marketing strategy, zero-rating. An application or website is zero-rated when a mobile operator does not count its usage against a user’s monthly data allotment, rendering its use effectively “free.”3 This practice is particularly controversial when a content provider, like Facebook, does not have to pay a mobile operator to offer their application for free. In this way Facebook gains an advantage over other social media websites because the mobile operator is essentially providing Facebook for free whereas users of other services had to pay for the data required to use the service. The harms assumed to arise from this relate to potential anti- competitive practices in, and inhibition, of innovation and local participation. Defence of zero-rating Facebook, its mobile operating partners, and some outside observers, believe zero- rating will increase Internet access and foster increased innovation and greater competition among Internet content providers. They claim that zero-rating has the potential to expand Internet access among those who have never used the Internet 1 “One Year In: Internet.org Free Basic Services,” Facebook, accessed August 5, 2015, https://internet.org/press/one-year-in- internet-dot-org-free-basic-services. 2 “Internet.org: Myths and Facts,” Facebook, accessed August 5, 2015, https://internet.org/press/internet-dot-org-myths-and- facts. 3 Barbara van Schewick, “Network Neutrality and Zero-rating,” accessed August 6, 2015, filing at FCC, http://apps.fcc.gov/ecfs/document/view?id=60001031582 2 and increase the amount of time existing Internet users, who spend far less time online than those in “always-online environments,” are able to spend online.4 Increased access, they believe, will then foster economic development for both small businesses and national economies. Facebook has presented two strong but not independently verifiable or well contextualized data points in a series of blog posts to show that its plan is working. Facebook observed an increase of over fifty percent, on average, in the rate at which new users join mobile networks in locations where Internet.org was offered.5 Facebook also responded to fears that the application limits Internet companies’ ability to compete with Facebook and its content partners because new users will not be able to pay for real Internet access. Its data shows that more than half of those who have begun using the Internet through Internet.org are now paying for their own data.6 Facebook believes that Internet.org has succeeded at “showing people the value of the internet and helping to accelerate its adoption.” Critics of zero-rating Proponents of the ‘open Internet’ and Net Neutrality worldwide respond that Internet.org sets a dangerous precedent that will ultimately limit Internet use and competition. They claim that zero-rating violates a prerequisite for the Internet to drive innovation and economic development, Net Neutrality. Net Neutrality is a principle which dictates that Internet data should be treated equally by service providers. Barbra van Schewick, Professor of Law and Faculty Director of the Center for Internet and Society at Stanford University, explains that zero-rating allows mobile operators and Internet Service providers to “favor some applications over others and causes the same problems as technical forms of differential treatment,” like slowing down or blocking certain forms of data.7 Criticism of zero-rating has not been confined to the United States and other developed economies. India has seen some of the most vociferous debate to date about the merits of zero-rating. Over a million Indians sent letters to the Telecom Regulatory Authority of India (TRAI) in support of banning zero-rating as a part of the Save the Internet Campaign. Sunil Abrahams of The Center for Internet and Society identifies the harms of network neutrality violations as: “…one, censorship by private parties without legal basis; two, innovation harms because the economic threshold for new entrants is raised significantly; three, competition harms as monopolies become more entrenched and then are able to abuse their dominant position; four, harms to diversity because of the nudge effect that free access to certain services and 5 “One Year In.” 6 Ibid. 7 “Network Neutrality and Zero-Rating,” Letter to the Federal Communications Commission. Re: Ex Parte Letter, GN Docket No. 09-191, GN Docket No. 14-28, (February 19, 2015), accessed August 7, 2015, http://apps.fcc.gov/ecfs/comment/view?id=60001018565. 3 destinations has on consumers reducing the infinite plurality of the Internet to a set of menu options. The first and fourth harm could result in the Internet being reduced to a walled garden.”8 TRAI has responded to this vociferous debate in India by publishing a public discussion paper on zero-rating and called for public comment9 which closed at the end of August amidst renewed calls by Open Internet proponents for a ban claiming that zero-rating implemented for the purpose of helping to bring the marginalised online can still be harmful. The United Nations Human Rights Council has established that citizens have a right to unfettered Internet access. Many nations are working to allow their citizens to realise this right. Critics argue that zero-rating could put this right at risk. For example, van Schewick warns that zero-rating sets a precedent where low-income American families will be shuttled into “‘walled gardens’ – cutting them off from free information and full participation” on the Internet.10 But might it not bring those who might otherwise remain offline online? Facebook’s data suggests that over half of new Internet users are not getting stuck within a “walled garden,” because they are paying for data usage. Arguments in favour of zero rating services providing a gate way to the open Internet, have also raised concerns about the poor being lured onto paid services that they can ill afford. Several of these operators do however provide alerts and voluntary cut off or permissions to continue notifications, self-regulating probably to avoid formal consumer protection regulation. Understanding some of these aspects requires further research. Tracking data which would be required for billing purposes and so collected anyway by operators could be made available by them to assess the wider impact of such services on access to the open internet and particularly on free and paid use and expenditure as a portion of household expenditure. Further, zero-rating for Internet uptake still “allows ISPs to tilt the market in favor of specific applications and to ‘pick winners and losers’ on the Internet.”11 Tilting the market could stifle competition from local social networks, apps developers and content providers who cannot afford to pay providers to zero-rate their content or who do not have the market share or eyeballs on their products to make it attractive to operator to provide free data for their services. 8 “Multiple Aspects Need to Be Addressed as the Clamour Grows for Network Neutrality,” accessed July 29, 2015, http://cis- india.org/internet-governance/blog/dna-april-16-2015-sunil-abraham-multiple-aspects-need-to-be-addressed-as-the-clamour- grows-for-network-neutrality. 9 “Net Neutrality Debate in India: Here Are All the Arguments You Need to Know,” The Indian Express, accessed August 13, 2015, http://indianexpress.com/article/technology/social/net-neutrality-in-india-licensing-to-zero-ratings-its-a-complicated-debate/. 10 “Network Neutrality and Zero-Rating.” 11 Ibid. 4 Zero rating as a late entrant strategy to gain market share Zero-rating is a relatively new tactic for South African operators. Cell-C became the first mobile operator to offer South Africans access to Internet.org at the end of August 2015.